CO129-623-9 Estimates of Expenditure- includes a report for the year ending March 1952 1-2-1951 - 30-11-1951 — Page 16

16

Hong Kong have as usual forwarded detailed

comments on the estimates for 1951-52 and Mrs. Petherick has prepared a summary of the main points.

The estimates for 1951/52 provide in round figures for revenue of $247 million and expenditure of 8234 million giving a surplus of $13 million. Taking this surplus into account the financial year 1951/52 will open with an estimated general revenue balance of 81912 million, a Development Fund of $55 million and an Essential Commodities Equalisation Fund of $30 million. The $191 million is not, however, all readily available as about 890 million will be tied up in stocks of commodities (the Essential Commodities Equalisation Fund has been set up to cover any losses which might arise out of the sales of these commodities and a further sum of nearly $25 million is immobilised, representing advances pending the raising of a loan, and if the position remains satisfactory this amount will be charged off to expenditure.

The financial position though satisfactory is therefore not quite as rosey as might appear at a casual glance. The budget has, however, been framed in the usual conservative manner and unless the further restrictions on trade resulting from the U.N.0. resolution on China and Korea has a further depressing effect on Hong Kong revenues the position should remain satisfactory.

The discouraging aspect from Hong Kong's point of view is the high percentage of expenditure on defence and security measures. $2 million to cover the cost of the camp for destitute Nationalist ex- soldiers is, for example, expenditure needlessly incurred because of interference by the F.0. who pressed Hong Kong to stop the repatriation of these ex-soldiers to Formosa in case this offended the Chinese People's Government! $1 million is also being spent on fire fighting equipment and new special equipment for the Defence Force and a sum of has been provided for the erection of further water storage tanks and a system of salt water distribution mains for fire fighting purposes. Police expenditure has also been increased as the direct result of the present emergency and the Police Force is now costing just under $17 million.

million

81 million has been included as a tentative figure as the contribution to H.M.G. in connection with the present emergency. Hong Kong have been asked to raise this figure and their proposals are awaited, but in paragraph 36 the Governor has already pointed out that if the contribution is fixed at approximately last year's figure the percentage of expenditure on defence and security measures will rise to 25.9%.

The despatch concludes with a reference to the interest-free loan of £3,000,000 towards the improvement of airport facilities. This is being considered on Communications Department papers and I think the Treasury will agree to the loan being made available if a suitable scheme is prepared.

Paragraph 11 will be of particular interest to Finance Department in view of our attempts to

/persuade